Articles

Since at least 2008 the authors of this article have noted and expressed their collective concern about the antiquated state of New York’s 1981 franchise law, which has never been amended for consistency with other state or federal franchise laws. New York prides itself on being the world’s center of trade, finance, and culture, but the New York Franchise Sales Act (NYFSA) discourages international franchising in New York.

On June 20, 2023, the New York State Legislature passed a bill that would impose a blanket ban on New York employers from entering into non-compete agreements with employees. The bill now goes to Governor Kathy Hochul for her consideration. If enacted, New York would join four other states—California, Oklahoma, North Dakota, and Minnesota—which ban all non-compete agreements, regardless of position or income level.

A discussion of the Federal Trade Commission’s recently proposed regulation on non-compete agreements, which, if enacted, would ban all worker non-compete agreements (for all employees and individual independent contractors) in all industries and positions, with only limited exceptions.

Franchisors can no longer use franchisee questionnaires during the franchise sales process, according to a new Statement of Policy effective January 1, 2023, issued by the North American Securities Administrators Association (“NASAA”), whose guidelines are followed in the 13 franchise registration states.

According to Franchise Times, a franchise discovery is the industry’s version of a show-and-tell. Prospective franchisees are brought to the brand’s corporate office for a day of interactions and education as the franchisor works to prove that it is the best option for attendees to invest in.

The Federal Trade Commission (FTC) has recently signaled a new drive to bring federal enforcement action against franchisors who violate the franchise disclosure rules by engaging in misleading sales practices.

Recently enacted amendments to the federal Lanham Act trademark statute (Trademark Modernization Act of 2020) which took effect last month, create new procedures and rules that will benefit trademark owners by:  A) clearing up the “clutter” of fraudulent trademark registrations which makes it difficult for business people launching a new business or product/service to find a new brand name that is not already registered, and B) giving trademark owners who prevail in court proceedings stronger legal tools to stop infringing use.

The battle to define the dividing line between two business models (franchisee versus employee) continues in the courts, state legislatures, and federal agencies, as employee activists continue to press the case that certain franchise relationships actually constitute an employment relationship.

Franchisors and state regulators have been struggling with the issue of how franchisors can continue to sell franchises in the midst of the coronavirus pandemic in a way that is not misleading, particularly if their franchise disclosure document (FDD) contains historical information from 2019 about franchisee financial performance which predates the pandemic?